The 80/20 Principle

The 80/20 Principle: The Secret to Achieving More with Less

by Richard Koch

The 80/20 Principles

• A few things are always much more important than most things
• Progress means moving resources from low-value to high-value uses
• A few people add most of the value
• Margins vary wildly
• Resources are always misallocated
• Success is underrated and underfeted
• Equilibrium is illusory
• The biggest wins all start small

A primer for time revolutionaries

• Make the difficult mental leap of dissociating effort and reward
• Give up guilt
• Free yourself from obligations imposed by others
• Be unconventional and eccentric in your use of time
• Identify the 20% that gives you 80%
• Multiply the 20% of your time that gives you 80%
• Eliminate or reduct the low-value activities

“There are only four types of officer. First there the lazy, stupid ones. Leave them alone, they do no harm. Second, there are the hard working intelligent ones. They make excellent staff officers, ensuring that every detail is properly considered. Third, there are the hard working stupid ones. These people are a menace and must be fired at once. They create irrelevant work for everybody. Finally, there are the intelligent lazy ones. They are suited for the highest office.”

 Erich Von Manstein on the German Officer Corps

 Rules for success in the 80/20 world

 1. Specialize in a very small niche

 2. Choose a niche that you enjoy and in which you can excel

 3. Realize that knowledge is power

 4. Identify your market and your core customers and serve them best

 5. Identify where 20% of effort gives 80% of returns

 6. Learn from the best

 7. Become self-employed early in your career

 8. Employ as many net value creators as possible

 9. Use outside contractors for everything but your core skill

 10. Exploit capital leverage

 80/20 Insights  into making money

 1. Make your investment philosophy

 2. Be proactive and unbalanced 

 3. Invest mainly in the stock market

 4. Invest for the long term

 5. Invest most when the market is low

 6. If you can't beat the market, track it (Indexing)

 7. Build the investments on your expertise

 8. Consider the merits of emerging markets

 9. Cull your loss makers

 10. Run your gains

 Daily happiness habits

•  Exercise 
•  Mental simulation
•  Spiritual/artistic simulation/mediation
•  Doing a good turn
•  Taking a pleasure break with a friend
•  Giving yourselves a treat
•  Congratulating yourself

  Medium term stratagems for happiness

•  Maximize your control
•  Set attainable goals
•  Be flexible
•  Have a close relationship with your partner
•  Have a few happy friends
•  Have a few close professional alliances
•  Evolve your ideal lifestyle